Section 223(d) insures two-year operating loss loans that covers
operating losses during the first 2 years after completion (or any
other 2-year period within the first 10 years after completion)
of multifamily projects with a HUD-insured first mortgage.
Section 223(d) helps avoid insurance claims on HUD-insured multifamily
mortgages by insuring separate loans to cover operating losses.
Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.
This program offers insurance for operating loss loans on projects
whose first mortgage is insured by HUD. HUD insures loans to cover
excess expenses over project gross income incurred during the first
two years following the date of project completion. The loan amount,
terms, and conditions are prescribed by HUD. HUD may also provide
an operating loss loan during any period of consecutive months (not
exceeding 24 months) in the first 10 years after the date of project
completion. A project can receive both loans but not for same two
year period. HUD insures the loan under the same section as the
original mortgage in an amount not exceeding the excess of operating
expenses over project income. The loan term is limited to the unexpired
term of the original mortgage. This program requires appropriated
credit subsidy, which is limited.
Owners of multifamily projects or facilities subject to a mortgage
insured by HUD
are eligible to apply.
The sponsor has a pre-application conference with the local HUD
Multifamily Hub or Program Center to determine preliminary feasibility.
The sponsor submits a formal application through a HUD-approved
lender to the Multifamily Hub or Program Center where the loan will
be processed. Information submitted by the applicant will be reviewed
and a determination will be made as to the maximum insurable loan
amount. Applications must be made within 3 years after the end of
the 2-year operating loss period for the 2-year loan. If program
requirements are met, the Multifamily Hub or Program Center will
issue a commitment to the lender for mortgage insurance.
This program is authorized by Section 223(d) (12 U.S.C. 1715n) of
the National Housing Act 1937, as amended; Public Law 90-448, as
amended; and Public Law 91-152, 12 U.S.C. 1715x. Program regulations
are found in 24 CFR 207.4(f). The basic program instructions are
in HUD Handbook " Mortgage Credit Analysis for Project Mortgage
Insurance " 4470.1, Rev-2. (Chapter 17) available on HUDclips.
The program is administered by the Office of Multifamily Housing
In fiscal year 2013, the Department did not insure any mortgages
under this section.